Court of Appeal blames state for 18-year delay in compensating United Insurance victims
United Insurance collapsed in the mid-2000s, leaving thousands of motorists, passengers, and accident victims uncompensated.
The Court of Appeal has faulted the government for failing to operationalise the Insurance Compensation Fund on time — a lapse that left victims of the collapsed United Insurance Company Limited without compensation for nearly two decades.
In a landmark ruling concluding an 18-year legal battle between public service vehicle (PSV) operators and the State, a three-judge bench comprising Justices Daniel Musinga, Mumbi Ngugi, and George Odunga upheld key findings by former High Court Judge Mary Ang'awa.
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The court declared the appointment of the Kenya Reinsurance Corporation Limited (Kenya Re) as the statutory manager of United Insurance illegal and void from the outset.
“The appointment of Kenya Reinsurance Corporation Limited as statutory manager was null, void ab initio and illegal,” the judges ruled.
Liable for financial losses
The court further held the government liable for the financial losses suffered by PSV operators due to its failure to operationalise the Insurance Compensation Fund — a statutory safeguard meant to protect policyholders from the collapse of insurers.
“We declare that the Government is responsible for the losses suffered by the respondents as a result of its failure to operationalise the Compensation Fund,” the bench stated, directing that compensation be computed after accounting for any recoveries from United Insurance or the Fund itself.
The dispute dates back to 2007, when Kensilver Express Limited and 192 other PSV companies, represented by lawyer Harrison Kinyanjui, sued the Commissioner of Insurance following United Insurance’s placement under statutory management over alleged insolvency.
Accident compensation claims
The insurer’s collapse forced PSV operators to personally bear the burden of accident compensation claims, leading them to accuse the government of violating their constitutional rights to property and fair administrative action.
Kinyanjui argued that the State failed to protect policyholders as required under Article 46 of the Constitution and the Consumer Protection Act, both of which guarantee consumer rights. He also challenged the appointment of Kenya Re as statutory manager, citing a glaring conflict of interest.
“Kenya Re could not act as both reinsurer and statutory manager of United Insurance. It was like asking a creditor to supervise its own debtor,” Kinyanjui told the court.
Although the appellate judges agreed that Kenya Re’s appointment was unlawful, they cautioned that nullifying all the corporation’s actions would cause greater public harm.
“It is not in the public interest that all the actions taken by the said manager before the decision by the court should be rendered null and void,” they observed.
The court therefore limited the nullification to actions taken after the 2007 High Court judgment, finding that while Justice Ang'awa was right to fault the government for regulatory failure, she erred in converting the original petition into a winding-up cause.
State’s appeal dismissed
As a result, the Court of Appeal dismissed the state’s appeal and ordered each party to bear its own costs — marking the end of one of Kenya’s longest-running insurance disputes and a significant victory for long-suffering policyholders.
In a related development, Justice Alfred Mabeya ordered the winding up of United Insurance Company Limited in July 2024 — a decision that policyholders immediately challenged. They argued that while the firm was illiquid, it was not insolvent, citing asset valuations exceeding Ksh 3.5 billion.
The policyholders also opposed the liquidator’s proposal to cap compensation at Ksh 250,000 per claimant, terming the figure arbitrary and grossly unfair.
United Insurance collapsed in the mid-2000s, leaving thousands of motorists, passengers, and accident victims uncompensated.
Founded in 1970, Kenya Reinsurance Corporation — the region’s oldest reinsurer — was controversially appointed to manage the defunct insurer despite being one of its major creditors.
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